The Government’s controversial Loan Charge policy has been described as “wrong on every level” by the boss of an accountancy firm.
Paul Hornby has issued an urgent plea to anyone being pursued over so-called Loan Charge payments to seek immediate advice before committing to any payments under the scheme which has left workers, many of them low-paid, with six-figure tax bills and has reportedly led to a number of suicides.
Chancellor Sajid Javid confirmed a review of the policy was to be undertaken last week but critics say it lacks the sufficient independence needed to adequately assess whether it should be discontinued.
Mr Hornby, the managing director of JF Hornby, an accountancy firm twice named best in the UK, said: “The actions of HMRC regarding the Loan Charge are totally wrong. Lives are being affected in the most terrible way because action is being taken against people who were acting perfectly lawfully at the time, but are now being punished by retrospective action.
“Discontent has reached fever pitch and hundreds of MPs have signed up to a call for this crusade to be ended. Boris Johnson promised ahead of becoming Prime Minister that he would suspend collection of all payments relating to this by the end of September.
“So far all we have had is the promise of a review, which is progress of sorts, but by no means enough and leaves inherent uncertainty.
“That has led to HMRC pushing hard for people it is already in contact with to sign up and agree payment terms.
“That really would be the worst thing that anyone affected by this could do right now due to the possible suspension of payment collection. My advice is to speak to your accountant, whoever they may be, to get guidance on what best to do.”
Tax on loan charge payments is being backdated by up to 20 years by HMRC. It relates to the way in which people working as contractors were paid.
When a contractor submitted an invoice, it was sent by the agency employing them to the Isle of Man and payment was subsequently made, minus deductions, by way of a so-called loan.
While it has been labelled as a tax avoidance scheme, many of those paid in this way considered the deductions to be tax payments, when in fact they were processing fees. Others say they simply followed advice given at the time.
The process was legal and above board for the years it was used, until HMRC finally clamped down on it following the bankruptcy of Glasgow Rangers FC, which had been operating a similar scheme.
Mr Hornby said: “This is destroying lives. Nurses, teachers and public sector workers along with many people who worked as freelancers are finding themselves in unimaginable situations.
“It is affecting people who should be looking ahead to retirement, but instead are wondering how they will ever manage to pay back what the taxman claims is his.
“Anyone affected should take sound advice as soon as possible and should not rush or be forced into making any decisions.”
Steve Packham, spokesperson for the Loan Charge Action Group, said: “We are extremely grateful to all the MPs and peers who have pushed for this, but they now need to ensure it is genuinely independent, with no interference from Treasury or HMRC.
“Also, it must ask for and be based on evidence, including from those facing the Loan Charge and from sector professionals otherwise it won’t be a review at all.”